Flexible finance solutions
21 March 2013
UDC Finance is heavily involved in asset finance, so DIESELtalk spoke to the two UDC men involved in this sector – Lawrence Proffit, national sales manager equipment dealer; and Don Atkinson, head of intermediaries.
DIESELtalk: Why should anybody use an asset finance company when they can go to their bank?
Lawrence Proffit: The best thing about an asset finance company is that you can utilise the asset as security as opposed to leveraging off your house or your other business assets. The loans will be tailored to tie in with the useful life of the asset, and the loans can also be structured around the cash flow of the business.
DIESELTalk: And UDC is quite flexible in that regard?
Don Atkinson: In addition to being flexible there’s a very useful discipline that comes with asset finance - you know the machine is going to pay for itself with the revenue it generates. And then when you sell the machine, you pay off the loan so that capital expenditure becomes very transparent, if you like, within the business.
I think the second thing with asset finance is it’s convenient. You can talk to a commercial account manager and have a similar relationship to what you would have with the bank, albeit a more flexible and focused on the assets.
But equally, you can access it through the dealership where you will be doing the deal, and picking up the paperwork, anyway. When you look at a lot of our client base around the country, time is pretty precious. So that’s a good way to do it.
DT: You’ve got a big footprint in car and light commercial finance. Presumably you are stepping up your efforts in the heavy truck, contractors equipment and agri machinery area - tell us about that.
LP: We’ve been a longstanding player in the agri market. We mirror our processes utilising our end-to-end online system called 'UDC Live' across the car and agri channels. And while we have had a footprint in the construction equipment and truck market, we are stepping that up at present.
UDC’s key dealer proposition is that we offer an online financing solution that is quick and simple - which makes it advantageous to the dealers to use the UDC product.
DT: Is your finance product designed so it is easily accessible digitally?
LP: Yes. the 'UDC Live' system is an end-to-end online program which is backed up by an automated scoring tool so that deals can be automatically approved and documents can be printed out immediately - a great convenience for a customer that wants an answer straight away. You can get an answer along with the documentation, and can sign the customer up within five minutes.
DT: Has your scoring system been specifically adapted to the commercial market, as opposed to your light vehicle market, where you punch it into the system and see what a vehicle is going to be worth in 3 years time, etc. How does that work with the equipment side?
LP: Almost the same - we’ve got terms of trade that we use, but in effect it’s reflective of many years of experience in the commercial finance game. It looks at the people behind the businesses as well as looking at the assets involved.
DT: You’re bank owned, how does that relationship work?
DA: It’s complimentary, we are bank owned and we are part of the commercial and agri segment of the ANZ Bank. We are complimentary to the Bank’s product line.
For example let’s look at a tractor dealership - they are probably going to need some sort of trade line if they are importing themselves, and the bank does that piece. They will need general banking facilities, transactional accounts, overdrafts, perhaps property finance, which are all provided by the bank.
Then they will probably need specialist stock funding, which is where UDC fits in with floor plan finance. What differentiates us from the other banks is that through UDC we can offer retail finance to dealerships. So it really is a full product suite - with UDC as a separate brand to reflect the depth of specialisation.
DT: With that commercial product - floor plan, international funding and so forth – is there an expectation that your customers banking is with ANZ or is that solely a UDC thing?
DA: We operate independently. We operate best with ANZ, but there are plenty of customers on our books who bank elsewhere and it’s certainly not expected.
The big advantage for a dealership utilising UDC and ANZ at the same time is a lot of the duplication is taken out of that process while maintaining the advantage of specialist provider. For example you would only have to complete one review a year for your financiers, providing one set of accounts.
The securities are also easier because UDC and ANZ agree in the background about priorities so there is less paperwork and administration.
DT: And yet as a finance company you’ve got the flexibility that a bank may not have in the area that you’re involved in?
DA: Exactly. We know assets because we deal with them day in, day out and we’ve got fantastic people with years of experience in managing assets. This expertise is what allows us to be flexible and is difficult for a trading bank to replicate.
DT: Do you work with your equipment suppliers to keep their clients within a commercial loop, so they buy another tractor, for example, in five years time?
LP: Definitely. We provide a lot of marketing support and information technology all aimed at pointing customers back to the equipment suppliers.
Again we run many of our informational support online via the UDC live system which is fantastic. So we work with the dealers on a regular basis to re-market their customer base to make sure that they stay with whatever brand that may be in the UDC fold.
DA: And I think particularly in the equipment space that’s where asset finance really comes into its own for dealers.
You put a structured payment plan in place, perhaps there’s a balloon payment in 36 months when they come out of a contract or its appropriate time to upgrade that piece of equipment and that payment acts as prompt to come back to the dealership.
So finance becomes part of your customer relationship management bringing customers back in to the dealership to reinvest at the end of term.
DT: Do you find dealers are using the live system to seek that information themselves?
DA: It’s interesting, we are just starting to see it on the equipment side - on the car side it's bread and butter part of their standard processes - but we are starting to see it.
LP: I think it’s fair to say that the equipment dealers, the non-car side, are learning a lot from the car market. Especially the marketing aspect - whether it’s direct marketing or print and TV advertising - they are slowly catching up with including financing as a major part of selling equipment. Dealers are now using effective marketing techniques including direct marketing, database mining, and subsidising of deals to attract attention.
DT: Are there any areas of the industry that you are concerned with at the moment, that you are wary on as far as lending?
DA: Conditions overall are stable at the moment and I think anyone who has run a business over the last 3-4 years through that GFC has probably run a pretty good ship. I think agri market has remained in good shape throughout and we are starting to see good signs in construction and road transport.
DT: Are you seeing a bigger business increase out of Christchurch?
LP: A steady increase. It is evident that the rebuild process has been stretched out as opposed to a big spike. We have seen an increase in activity in line with what’s been happening down there and momentum is continuing.
DT: The re-build is only really just beginning - are you expecting it to keep going for quite some time and will the spike come?
DA: Absolutely. We’ve noticed for within our customer base that it hasn’t just been a Christchurch-based phenomenon. The national firms have obviously benefited and a number of regional companies have moved gear down as well – so a very flexible market. We’re in a strong position to help businesses coming out of the downturn.
DT: There was also a lot of gear lying around idle?
LP: Given the aftermath of the GFC, that was definitely the case, but there is evidence of capital constraints in certain areas at present. Again, the people that have come through the past few years are generally astute business people who are watching how they gear up for the short and medium term.
DT: Tell us a little bit about yourself.
LP: I’ve been with UDC for 10 years, initially involved with the risk and operational side of the business. After that I moved into a sales position in the greater Auckland. From there I looked moved into our dealer team looking after intermediaries with a diverse range of assets types including Ag equipment, yellow goods and IT equipment - we have about 170 dealers nationwide
DT: You have a team of how many and where are they based?
LP: I have got a team of five, three sales people located throughout the country - one in the South Island, one in the central North Island and one in the upper North Island. They solely run our dealer relationships but it’s important to know that they work in with our commercial reps. We’ve got another 18 commercial reps throughout the country - along with our car dealer reps. These guys are supported by our very experienced back office team.
Going back to how our banking connections works, there could be a relationship where a dealer has a $1 million hire fleet as well as a $2 million dollar floor plan or bailment facility, sells UDC Finance and banks with ANZ. In that case there you’ve got an ANZ rep and a UDC commercial rep who will be managing that relationship, leveraging off the expertise and knowledge of a UDC equipment dealer rep.
Likewise we’ve got many dealers that supply trucks or agri equipment and cars – so again we can have one or two reps- whatever is going to best suit dealers’ needs.